Delegate candidates clash over EZ funding

USC economic study: EZs work

Three professors at the University of Southern California published a study in March examining state and federal enterprise zones. It was the first comprehensive national study of the programs.

Researching decades’ worth of statistics, professors Charles Swenson, John C. Ham and Ayse Imrohoroglu compared the economic data in communities before and after establishing enterprise zones, as well as in areas without the zones. There are about 8,000 enterprise zones around the country.

“They do work,” Swenson said. “What we’ve found is that they decrease unemployment rates, decrease poverty rates and increase family incomes.”

Swenson, who has presented to California’s legislature as part of a discussion on economic policy, noted that Virginia’s grant-based system was unusual because most states use a tax credit system. He said California has recently voted to expand its program.

“All these cities and states are competing for businesses to move in,” Swenson said, “and it is a competitive landscape because 43 states have these programs. If it takes one to be competitive, it’s important to realize that other states are competing for their business, too.”

—Catherine Amos

Seward Anderson says Delegate Danny Marshall “has missed the signals.” Marshall says his opponent is “just looking for something to run on.”

The facts are these: The state’s economic development tool known as Enterprise Zones has been continuously underfunded since 2004. Last year, businesses only received 46 percent of the grant money they were eligible to receive because of high demand for the money.

Anderson, the former Danville mayor challenging Marshall for the 14th District seat, has criticized him for being unaware of the funding shortfall — a state budget issue that puts localities in an uncomfortable position.

“Delegate Marshall’s eyes are not on the prize,” Anderson said Monday. “… I think that if you are going to be fully engaged in representing your constituents that you would do your due diligence.”

The Virginia Department of Housing and Community Development awards grants based on real property investments and job creation, a structure the program has followed since changing from a tax credit system in 2005. But every year since 2004, the demand for the awards exceeded what the General Assembly allocated for the Enterprise Zone program — and the DHCD must prorate the available funds.

“It’s the local economic development’s credibility that’s at stake,” said Linwood Wright, Danville’s public and governmental affairs consultant. “And I think that’s very, very unfair and is certainly not the kind of business-friendly attributed that the commonwealth is trying so hard to portray in other areas.”

The possibility of proration is not a new problem, said DHCD Director Bill Shelton, who recently stopped in Danville to meet with Delegate Marshall, R-Danville, Delegate Don Merricks, R-Pittsylvania County and Senator Robert Hurt, R-Chatham to discuss the program and possible solutions.

Because there are two major unknowns to the program — how many businesses will apply and how much money will be appropriated — it’s impossible to predict how much money businesses will receive each year, Shelton said.

“It was always an issue,” he said. “There was no way to guarantee that there would never be a proration. It has been deeper in the last two years because the demand has been going up significantly.”

Earlier this summer, Marshall said he was unaware the funding was “as big a deal as it’s seemed to be made out to.” But Anderson said Marshall should have known, given his service on the Tobacco Commission, which in 2007 spent $900,000 to fund the 2005 Enterprise Zone grant shortfall, including $344,325 for Danville businesses.

However, Marshall did not join the Commission until January 2008.

“I did not know that,” Marshall said of the commission’s one-time grant.

Marshall has also said he received a letter from a constituent complaining about the funding problem “three or four years ago.” He clarified Monday that the letter came before the program underwent major changes in 2005.

“I thought that (the 2005 changes) would fix the problem,” Marshall said. “… Evidently it did not fix the problem. I’m getting some information now … to see if we can’t try to tweak it again in 2010.”

Wright said he and representatives from his office have met with Marshall when a need arises, but said he never called Marshall to specifically discuss Enterprise Zones. Wright joined the city in his current capacity in January and became aware of the extent of the four-year funding problem in March.

“I just don’t see a great need to be in constant contact with (Marshall) on this kind of subject,” he said. “It’s a state budget item. I would expect the delegate to be aware, within reason, of what’s going on.”

Anderson stressed that both the Governor’s Opportunity Fund and Enterprise Zones are what fuel local economic development. Marshall touted only the Governor’s Opportunity Fund, which he has voted to cut in the past because of extra money leftover.

“I think Mr. Anderson is just looking for something to run on,” Marshall said. “If you talk to economic developers, they will say the Governor’s Opportunity Fund is the main fund. We have funded (it) and it has had enough money in the fund to be successful. Every year it’s had a surplus.”

Anderson said it was the job of the delegate to seek out the problems.

“I suppose that some entities govern by the squeaky wheels thesis,” Anderson said. “I don’t think that something goes on for five years without somebody knowing it. (These tools) are things that we should, as servants of the people, have our eyes on. I think over an extended period of time, he’s missed the signals.”